The market demand in a Bertrand duopoly is P = 15 - 4Q and the marginal costs are $3

Marketing Jan 13, 2021

The market demand in a Bertrand duopoly is P = 15 - 4Q and the marginal costs are $3. Fixed costs are zero for both firms. Which of the following statement(s) is/are true?

a. P = $3.

b. P = $10.

c. P = $15.

d. None of the statements associated with this question are correct.

Expert Solution

Assuming that the firms produce homogeneous products and given the symmetric cost structure, equilibrium is attained where prices are set equal to marginal cost by both the firms, i.e. the price set by both the firms is same and equals to $3.

Hence, the correct answer is option (a) P = $3.

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